We recently compiled a list of the 7 Best Stocks to Buy for Long Term. In this article, we are going to take a look at where Amazon.com Inc (NASDAQ:AMZN) stands against the other stocks.
Market Strategist Says The Economy May Re-Accelerate on its Own
On September 23, Chris Watling, Longview Economics founder, CEO, and chief market strategist, appeared in an interview on Yahoo Finance to discuss the rate easing path and the impact it may have on the market.
According to Walting, the market is deeply divided on not two but three different sides. While some analysts and investors foresee a recession, others believe the economy is going towards a soft landing, and of those a small minority believe that the economy may accelerate at a rapid pace. Walting also added that while predicting the appropriate terminal rate is interesting, there is a lot more going on with the economy. Comparing economic conditions to the 2008 recession, households and corporations are in much better shape, hinting that a recession may not be the most likely outcome.
He believes that the economy may be slowing right now but it may experience faster reacceleration than before without the need for further falls. His advice to investors is to judge the economy based on multiple data points. As for the appropriate portfolio, Walting suggests that bonds are overcooked and gold must be given a pause. At the moment, the market is rotating away from tech into defensive sectors, and in the future, it may rotate more towards cyclical stocks.
The Fed is Thinking About Growth
As the S&P 500 recorded an upside following the Fed’s easing cycle, investors and analysts alike eye a soft landing for the economy. On September 26, Liz Miller, Summit Place Financial Advisors founder and president, appeared in an interview on Yahoo Finance to discuss the future of markets.
Miller states that the pivot has been great for the financial markets and now that the Fed is thinking about growth, investors are hopeful of a soft landing. She suggests that stocks in sectors such as housing, rental, finance, and consumer goods may benefit immensely from the easing interest rate cycle.
Miller suggests that the S&P 500 is not the best way to measure the performance of financial markets, given that it is skewed to the mega-cap tech stocks. Looking at other indices, other sectors have not made highs since December 2021. She believes the market may be flat but there is huge potential for upsides. Miller shares concerns over the Chinese economy and how it influences the global outlook. She suggests that for the global economy to balance, companies must work to regain consumer confidence in China.
Now that we have studied the appropriate portfolio mix for investors following the Fed’s decision, let’s take a look at the 7 best stocks to buy for the long term.
Our Methodology
To come up with the 7 best stocks to buy for the long term we examined promising stocks hedge funds are piling into. These are blue chip stocks with wide moats and have long track records of driving shareholder returns. We have ranked the stocks in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com Inc (NASDAQ:AMZN) is a technology company that specializes in e-commerce, online retail, streaming, and data cloud services. Its e-commerce platform is functional in 20 countries and ships to over 100 countries. Its proprietary cloud service, Amazon Web Services, on the other hand, is used by millions of active customers and has over 130,000 AWS partners across 200 countries.
The company is on track to capture over 40% of the e-commerce market in the United States. As for its cloud segment, AWS has logged 30% plus operating margins consistently for the past five quarters, making it a star performer.
Amazon.com Inc (NASDAQ:AMZN) is also making strides on the AI front. Over the past few months, the company has partnered with AI startups like Anthropic and signed deals with the US government to test new AI models. As for AI hardware, the company has produced several AI chips to reduce its dependence on other companies. Speaking of AI, AWS is now housing the next generation of Llama models from Meta, giving customers more choices to build, deploy, and scale generative AI applications. The new models are capable of visual reasoning, document processing, and multilingual translation.
Amazon’s growth is undeniable which explains its position on our list. Analysts are bullish on AMZN and their 12-month median price target of $220 points to a 17% upside from current levels. Overall, AMZN was held by 308 hedge funds and Fisher Asset Management was the largest shareholder, according to the Insider Monkey database.
Meridian Hedged Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company that operates e-commerce, cloud computing, digital advertising, and other businesses. We own Amazon because we believe it is well-positioned to benefit from several strong secular trends, including the shift to online shopping, the growth of cloud computing, and the increasing importance of digital advertising. The company exceeded expectations in the first quarter, with cloud-computing revenue growth accelerating, driven by easing cost optimization pressures and the ramp of generative AI workloads. The North American retail segment drove record operating margins, highlighting the success of Amazon’s efforts to improve efficiency and lower its cost to serve. International retail also showed promise, as emerging markets steadily progressed towards profitability. Given the strength across these key segments, we continue to hold the position in the company.”
Overall AMZN ranks 1st on our list of the best stocks to buy for long term. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.